Australian comPet¡tion& Consumer Commission
Our Ref: +35t5 ContactOfücer: DerekFarrell / KateEckermann GPOBox 3131 ContactPhone: (08)8946 9610 CanberraACT 2601 23 MarcusClarke Street CanbenaACT 2601 8 December2011 tel:(02) 62431111 fax: (02)6243 1199 www.accc.gov.au
Dear Sir/lvladam
As you may be aware,the Australian Competition and ConsumerCommission (ACCC) is the independentstatutory authority responsiblefor ensuringcompliance with the Competition and ConsumerAct 2010 (the Act) (formerly known as the Trade Practices Act 1974). The purposeof the Act is to encourage afair and competitive business environment and provide for consumerprotection. Schedule 2 to the Act contains the Australian ConsumerLaw (the ACL) which, amongstother things, prohibits misleading and deceptiveconduct.
The purpose of this letter is to make the debt collection industry aware of the outcome of the ACCC's recent court action relating to misleading conduct in this industry.
Misleading conduct
As you may be aware,s. 18 of the ACL þreviously s. 52 of the Trade PracticesAct) prohibits a person,in trade or cofirmerce,from engagingin conduct that is misleading or deceptive,or is likely to misleador deceive.
In considering whether conduct contraveness. 18, the overall impression createdby the alleged conduct determineswhether it is likely to lead a significant number of people into effor or has the tendencyto deceive such persons. In general,misleading someonemay include conduct ranging from lying to them, to making false or inaccurateclaims, to creating a false impression,to leading them to a wrong conclusion,to omitting important information.
It is important to note that intention to mislead or deceivedoes not have to be established to prove abreachof s. 18 of the ACL. Whether or not conductis held to be misleadine will dependon the circumstancesof eachcase.
Recent proceedingsregarding debt collection
In October 2010, the ACCC instituted legal proceedingsin the Federal Court againstthe principal of a Melboume law firm (the Respondent), alleging misleading and deceptive conduct in contraventionof s. 52 of the Trade PracticesAct (as s. 18 of the ACL was then known) with respectto severaldebt collection notices sentto alleged debtors of various DVD hire storesfor which the law firm acted. OnlT October 201I, the FederalCourt made orders by consentagainst the Respondent declaring that they had engagedin conduct in contraventionof s. 52 of the Trade Practices Act. A copy of the judgment is enclosedfor your information.
The following summarisesthe details of the conduct the FederalCourt declaredto be misleadingor deceptive,or likely to misleador deceive.
o Debt collection notices sent by the law firm containedstatements that it actedon behalf of an identified client in relation to the recovery of an outstandingamount 'together wìth $30.00 [or other such amount specified that was not $0] Solicitors costs'. This was declaredto be misleading as there was no outstandingamount which included $30 (or other such amount specified) for solicitor's costsand furthermore, the law firm's client had no necessaryentitlement to recover solicitor's costs in respectof its debt claim.
o Debt collection notices sent by the law firm containedstatements that: an outstandingamount was required to be sent to the law firm within 5 business days of the date of the letter, failing which the law firm had instructionsto 'this proceedwith legal action without further notice and that will result in added costs' to the addresseeofthe notice; the legal costs incurred by the addresseeas a result of the law firm issuing 'very proceedingsagainst them were likely to substantially exceedthe amount of the claim to date'; if the matter was not resolvedto the law firm's satisfactionwithin 5 businessdays 'expensive of the date of the letter, legal proceedings will be issuedagainst you withoutfurther notice'; 'using documentswere being preparedagainst the addressee all available court processesto recover the amount due'to the client and if payment was not made by the addresseewithin 5 businessdays from the date of the notice, the law firm 'will would issueproceedings on behalf of the client which only involveyou in additional costs'. These statementswere declaredto be misleading because,if unsuccessfulin the legal proceedings,a creditor would have no entitlement to recover legal costs in respectof its debt claim. Furthermore,even if successful,a creditor would not necessarily obtain an order for costs in respectof a proceedingissued for the recovery of a small debt. In this respect,many of the debtsclaimed were small, and MagistratesCourt / Small Claims / Civil and Administrative Tribunals legislation in the Statesand Territories variously provide that legal costs cannot be recoveredfor small debt claims except in special circumstances.
'unless o Debt collection notices sent by the law firm contained statementsthat thefull amount claimed is paid/you successfullydefend the summonsonce issuedat Court, then we will enterjudgment againstyou'. This was declaredto be misleading as a law firm cannot enterjudgment against a debtor without obtaining an order from the Court. A judgment cannot be entereduntil legal proceedingsare commencedand thereafter: if the debtor doesnot file a defence.an order in default of defenceis obtained against the debtor; or a summary order is obtainedagainst the debtor on the basisthey have no defence; or on the hearing of the matter, the creditor representedby the law firm is successful in the claim againstthe debtor.
'such o Debt collection notices sent by the law firm contained statementsthat judgment wìll be enforced by a waruant or a garnishee order and/or attachmentof earnings '. order against your wageswhich will be served upon your employer This was declaredto be misleading as a law firm cannot itself enforce any judgment obtained againsta debtor. The creditor representedby the law firm would needto be successfulin Court proceedings,then an application for ari order for a warranr, garnisheeorder and/orattachment of eamings would need to be madeby the law firm, and then the Court would needto grarúan order for a warrant, garnisheeorder and/or attachmentof earninss order.
o Debt collection notices sent by the law firm did not incorporate its letterheadand were similar in format to a documentthat had been, or was able to be, filed with a Court. This was declared to be misleadingas a reasonableperson in the classof addressees that were sent the notices would believe they had been sent a documentthat had been, or \Ã/¿rsable to be, f,rledin a Court, when that was not so.
The Federal Court also ordered: o injunctions againstthe Respondent; o that the Respondentpublish conective notices in the Australian Financial Review, the Australia,the Lawyer's Weekly, and Credit Managementin Australia; o thatthe Respondentensures that they, and the law firm's staff, undertaketrade practices compliance training at least once a year for the next 3 years;and o that the Respondentcontribute $30,000 towards the ACCC's costs.
The Court fuither ordered that its findings in theseproceedings, with the sealof the Court thereon,be retained in the Court for the pu{posesof s. 83 of the Act. As you may be awate,this meansthat the findings in the ACCC's proceedingscan be used as prima facie evidenceof those same facts in any later proceedingsby an affected personfor damagesor compensationorders.
Action to be taken
I recommendthat you review the debt collection letters and notices your practice usesin its debt recovery work, with referenceto the Act, to ensureno aspectsof those letters and noticesare misleadingor deceptive,or likely to mislead or deceive. If you do not have expertisein trade practices law, I recommendthat you seek legal advice from a practitioner who does.
In the review of your debt collection letters and notices, some important things to rememberfrom these proceedingsare: . if something is only a possible consequenceof not paying a debt, ensureyou do not createthe impression that it is a definite consequence; o before assertingthe right to payment of administrative and./orlegal costs on top of a debt amount, ensureyou are aware of whether or not your client has a legal entitlementto claim this by referenceto both the relevant Stateor Tenitory MagistratesCourt / Small Claims / Civil and Administrative Tribunals legislation, and the contractual arrangementsbetween your client and the allegeddebtor; . ensureyou do not createthe impressionthat your debt collection lettersand notices are documentsthat have beenor are able to be filed with a Court.
Further information
As you may be awate, s. 50 of the ACL (previously s. 60 of the Trade PracticesAct) prohibits the use of physical force, coercionand undue harassmentin connectionwith the payment for goods and services. Generally,undue harassmentcan be constitutedby unnecessaryor excessivecontact or communicationwith a debtor calculatedto intimidate, demoralisedor exhaust them. Coercionis constitutedby any incident of actual or threatenedforce or compulsion that restrictsa debtor's choice or freedomto act.
Thoseinvolved in debt recovery work in your practice should take careto avoid such conductwhen engaging with debtors. The maximum penalty for contraventionsof s. 50 is $1.1million for corporationsand $220,000for individuals.
Further guidanceon debt collection and your obligations under the Act can be found in the joint ACCC and Australian Securitiesand InvestmentsCommission publication Debt collection guideline: for collectors and creditors, which can be accessedat: http:llwww.accc.gov.au/contentlindex.phtmllitemldlT33222.
After theserecent proceedings,and this further information provided to the debt collection industry, the ACCC considersthe industry to be on notice and will take aseriousview of any further complaints received about this type of conduct.
Should you have any queries about the contentof this letter, pleasecontact either Derek Farrell or Kate Eckermannon (08) 89469610.
Yours sincerelv
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ScottGregson Group GeneralManager EnforcementOperations Australian Competition & ConsumerCommission FEDERAL COURT OF AUSTRALIA
ACCC v Sampson [201U FCA f 165
Citation: ACCCv Sampson[2011] FCA I165
Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v PIPPA ROSALIND SAMPSON
Filenumber: VID 852of 2010
Judge: TRACEY J
Dateofjudgment: 17 October20ll
Legislation: Competitionand ConsumerAct 2010(Cth) Schs2, 7 EvidenceAct 1995(Cth) s l9l FederalCourt of AustraliaAct 1976(Cth) s 2l TradePractices Act 1974 (Cth) (repealed)ss 52, 80, 83, 86C Trade Practices Amendment(Australían ConsumerLaw) Act (No 2) 2010(Cth)
Casescited: Ainsworthv CriminolJustice Commission (1992) 175 CLR 564 cited Australian Competitionand ConsumerCommission v Allerg PathwayPty Ltd 120091FCA960 cited Australian Competitionand ConsumerCommission v AuspineLimited (2006) 235 ALR 95 compared Australian Competitionand ConsumerCommíssion v CosicHoldings Pty LtdÍ20091FCA 1579cited Australian Compe tition and Consumer C ommis sion v Midland Brick CompanyPty Ltd (2004)207 ALR329 cited Australian Competitionand ConsumerCommissionv MSY Technologl,'PtyLtd Q'{o2) [20] l] FCA 382cited, considerec Australian Competitionand ConsumerCommission v Skins CompressionGarments Pty Ltd [2009] FCA 710 cited Australian Competitionand ConsumerCommission v lililleseeHealthcare Pty Ltd Q,{o2) [20] l] FCA752 considered Australian Competitionand ConsumerCommission v IïlilsonParking 1992 Pty Ltd [2009] FCA 1580cited BMI Límited v FederatedClerks Union of Australia (1983) 51 ALR 401considered, distinguished Forster v JododexAustralia Pty Ltd (1972) 127 CLP. 421 cited,considered ICI Australia OperationsPty Ltd v TradePractices -2-
Commission(1992) 38 FCR 248 compared Medical BenefitsFund of Australia Ltd v Cassidy(2003) 135FCR I applied Ministerfor Environment,Heritage and the Arts v PGP DevelopmentsPty Ltd (2010)183 FCR 10cited Rursl PressLimited v Australian Competitionand ConsumerCommission (2003) 216 CLR 53 cited RussianCommercial and Industrial Bank v British Bank for ForeignTrade Limited Íl92ll2 AC 438 cited
Dateof hearins: Heardon the papers
Place: Melbourne
Division: GENERALDIVISION
Category: No catchwords
Numberof paragraphs: 26
Solicitorfor the Applicant: CorrsChambers Westgarth
Solicitorfor the Respondent: JohnDunne & Associates IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 852of2010
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND: PIPPA ROSALIND SAMPSON Respondent
JUDGE: TRACEY J DATE OF ORDER: 17 OCTOBER2011 WHERE MADE: MELBOURNE
BY CONSENT THE COURT DECLARES THAT: l. The Respondentin trade or commerceengaged in conduct that was misleadingor deceptiveor likely to mislead or deceive,in contraventionof s 52 of the Trade PractícesAct 1974(Cth), by: (a) sendingto addressesin all Statesand Territories during the periodsApril2002 to 12 October 2010 letters titled "URGENT NOTICE", examplesof which are attachedas Annexure A to this order.that containedthe statementsthat: (i) Goddard Elliott acted on behalf of an identified video rental client ("the video rental client") in relationto the recoveryof an outstanding amount "togetherwith $30.00(or suchother amountspecified that was not $0) Solicitorscosts":and (ii) the outstandingamount was required to be sentto GoddardElliott within five (5) businessdays of the date of the letter failing which Goddard Elliott had receivedinstructions to proceedwith legal action without further notice and that "this will result in addedcosts to vott". andthereby representing that: (iiÐ the video rentalclient claimingthe outstandingamount was necessarily entitled to recover solicitor's costs of $30.00 (or such other amount specifiedthat was not S0) as part of the recoveryof the outstanding amount claimed (First Urgent Notice A Representation),even though -L-
there was no outstandingamount which included $30 (or such other amountspecified) for solicitor'scosts and, moreover,the video rental client had no necessaryentitlement to recoversolicitor's costs in respect of that claim; and (iv) if legal action was takento recoverthe outstandingamount then this would necessarilyresult in the addresseeincurring additionalcosts associated with legal proceedings (Second Urgent Notice A Representation),even though the video rental client would have no entitlementto recoverlegal costs in respectof unsuccessfullegal action for a debt claim and eventhough, if successfulin its legal action,the video rental client would not necessarilyobtain an order for costsin respectof a proceedingissued for the recoveryof a smalldebt. (b) sendingto addresseesin all Statesand Territoriesduring the period 1 December 2004to 12 October2010 a lettertitled "URGENT NOTICE" an exampleof which is attachedas Annexure B to this order (UrgentNotice B), that containedthe statementsthat: (i) the legal costsincurred by the addresseeas a result of GoddardElliott issuing proceedingsagainst them were likely to "very substantially exceedthe amountof the claim to date"; and (ii) if the matter was not resolvedto GoddardElliott's satisfactionwithin five (5) business days of the date of the letter, "expensivelegal
proceedingswill be issuedagainst you withoutfurther notice", and therebyrepresenting that if legal proceedingswere issuedin respectof the outstandingamount then this would be likely to resultin the addresseenecessarily incurring additional legal costs, which costs would substantiallyexceed the amountclaimed by the video rentalclient (UrgentNotice B Representation),even thoughthe video rentalclient would haveno entitlementto recoverlegal costs in respectof unsuccessfullegal action for a debt claim, and even though, if successfulin its legal action,the video rentalclient would not necessarilyobtain an order for costsin respectof a proceedingissued for the recoveryof a small debt; (c) sendingto addresseesin all Statesand Territoriesduring the period 1 December 2004 to 12 October 2010 a letter titled "NOTICE OF IMPENDING -J-
PROCEEDINGS"an exampleof which is attachedas AnnexureC to this order (Noticeof ImpendingProceedings) that contained the statementsthat: (i) documentswere being preparedagainst the addressee"using all available court processesto recoverthe qmountdue" to the video rental storeclient; and (ii) if paymentwas not madeby the addresseewithin five (5) businessdays from the dateof the Notice of ImpendingProceedings, Goddard Elliott would issueproceedings on behalfof the video rentalclient whlch "will only involveyou in additional costs", and therebyrepresenting that if legal proceedingswere issuedin respectof the outstandingamount then this would resultin the addresseenecessarily incuning additionallegal costs(Notice of ImpendingProceedings Representation), even thoughthe videorental client would haveno entitlementto recoverlegal costs in respectof an unsuccessfullegal action for a debt claim, and even though,if successfulin its legalaction, the videorental client would not necessarilyobtain an order for costsin respectof a proceedingissued for the recoveryof a small debt; (d) sendingto addresseesin all Statesand Territories during the period I December 2004 and 2 June 2010 documentstitled "NOTICE OF CREDITORS INTENTION TO COMMENCE PROCEEDINGSAT A LOCAL COURT',and ..NOTICE OF CREDITORSINTENTION TO COMMENCE PROCEEDINGS AT A MAGISTRATESCOURT", examplesof which are attachedas Annexure D to this order (together,the Notice of Intentionto CommenceProceedings), that containedthe statementsthat:
(i) "Unless the full amountclaimed [plus costs] is paid/you successfully defendthe summonsonce issued at Court,[or a defencelodged], then we will [subsequently]enter judgment against you"; and (ii) "Such judgment will be enforcedby a warrant or a garnisheeorder [and/oran attachmentof earningsorder againstyour wageswhich will be servedupon your employer]", and therebyrepresentin g that: (iii) Judgmentcould be enteredby GoddardElliott againstthe addressee withoutthe obtainingof an orderfrom the Court,unless the amountwas paid in full or the proceedingwas successfully defended by the addressee -4-
(SecondNotice of Intentionto CommenceProceedings Representation), even though in truth judgment could not be entered until legal proceedingshad been commenced, and thereafter an orderobtained from theCourt;and (iv) GoddardElliott could itself enforceany judgmentobtained against the addresseeby meansof a warrant,garnishee order and/or attachmentof earnings (Third Notice of Intention to Commence Proceedings Representation),which it couldnot, the true positionbeing that the video rentalclient neededto be successfulin Coun proceedings,and thenan applicationfor an orderneeded to be made,and then the Courtneeded to grant an order for a warrant, garnisheeorder and/or attachmentof
(e) ,.no,nffii::;',:il" Statesand rerritories and during rhe periods set our in sub-paragraph(d) abovethe Notice of Intentionto CommenceProceedings that was similarin format to a documentthat had been,or was ableto be, filed in a Court,and therebyrepresenting that the Notice of Intentionto Commence Proceedingswas a documentthat had been,or was able to be, filed in a Court (FirstNotice of Intentionto CommenceProceedings Representation), when that was not correct. BY CONSENT THE COURT ORDERS THAT: Injunctions 2. The Respondentbe restrainedfor a periodof five (5) yearsfrom the dateof this order from making or causingto be made the following representations(each as defined above): (a) FirstUrgent Notice A Representation; (b) SecondUrgent Notice A Representation; (c) UrgentNotice B Representation; (d) Noticeof ImpendingProceedings Representation; (e) FirstNotice of Intentionto CommenceProceedings Representation; (Ð SecondNotice of Intentionto CommenceProceedings Representation; and (g) Third Noticeof Intentionto CommenceProceedings Representation. CorrectiveAdvertising 3. The Respondentcause to be published,at her expense,within 2l daysof the dateof this order,a correctiveadvertisement in the form of AnnexureE to this orderin the: -5-
(a) Fridayedition of eachof the: (i) "AustralianFinancial Review"; and (ii) "The Australian"; ("theNewspapers") and in the next availableedition of the: (b) LexisNexis publication, "Lawyers Weekly"; and (c) AustralianInstitute of CreditManagement publication "Credit Managementin Australia". and, further,that the Respondentshall use her best endeavoursto ensurethat such advertisementshall be" (d) placedwithin that partof the Newspapersstyled "Legal Affairs"; and (e) in text which is in a type not lessthan l0 point. Training 4. The Respondentwill, for a periodof three(3) yearsfrom the dateof this orderand only whilst the Respondentcontinues to practiceas a legalpractitioner: (a) receive;and (b) for so long asthe Respondentremains a principalof GoddardElliott, causeall the employeesof GoddardElliott whose duties could result in them being concernedwith conductthat may contraveneChapters 2 or 3 of the Australian ConsumerLaw (Schedule2 to the Competitionand ConsumerAct 2010 (Cth) (ACL)) to receive, regular(at leastonce a year)practical training administered by a qualifiedcompliance professionalor legalpractitioner with expertisein tradepractices law, that focusseson Chapters2 and3 of the ACL. 5. Upon the completion of any training conductedpursuant to order 4 above the Respondentwill, within 14 days,at her own expenseprovide the Applicant with a statutorydeclaration confirming the completionof the trainingconducted in accordance with that order,including the date conducted,and the nameand qualificationsof the personwho conductedthe training. Verification affidavit 6. The Respondentfile and serve on the Applicant,within 42 daysof the date of this order,an affidavit,sworn by her, verifyingthat shehas carried out the obligationsmade underthe ordersofthe Court setout in paragraph3 above,and: (a) detailing the steps taken in relation to the publication of the corrective advertisements;and -6-
(b) providinga copyof the correctiveadvertisements.
Other orders 7. A copy of the Reasonsfor Judgment,with the sealof the Courtthereon, be retainedin the Courtfor the purposesof s 83 of the Act. 8. The Respondentpay the Applicant's costsof the proceedingin the agreedsum of s30.000.
Note: Entry of ordersis dealtwith in Rule 39.32of the FederalCourt Rules 2011. -7-
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L¿\\t/YFIRS ¡,,rISL.Ij^DIN(iCL;\f totS't0 RICOVtìtr S\..f^I..Ll]rìt]1 S I¡rlllouringCouri itctioll by i)rc,{ristnliair Cùnrps:itionÀ{d Cbr¡sumr:iC¡¡ntnrissiou, tirc FcricrSl cou¡¡ r¡f Âu:;tmliaìrils ticclarcd th¡t M¡^t'ipp:r s..rlqsun, lhu priucípslol'Goridur¿i lìtiion f.rwyors,lras enguged iu nrislcadingar:d dr:ccp{ivc coli,.kct in h¡¿,lchoftltë I'r¿ul¿!¡-aç¡¡ç¿,¡ ,ir¡ i I !'.i. $ls Slrnr¡isortlvls fi¡t¡ndto hnvebroken lf:c l¡rv in lolïcrslnú notíuasseut on l¡ohnll'ol'vi ,ì i¿D3t Í.. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 852 of 2010 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION A.pplicant AND: PIPPA ROSALIND SAMPSON Respondent JUDGE: TRACEY J DATE: 17 OCTOBER 2011 PLACE: MELBOURNE REASONS FOR JUDGMENT Ms PippaSampson is a solicitorwho numbersamongst her clientscompanies which rent digital video discsto membersof the public. From time to time Ms Sampsonsent noticesto membersof the public who were indebtedto the companiesfor outstandingrental charges. The AustralianCompetition and ConsumerCommission ("the ACCC") commenceda proceedingin the Court alleging that Ms Sampsonhad contraveneds 52 of the Trade PracticesAct 1974 (Cth) ("the Act") (now the Competitionand ConsumerAct 2010 (Cth). She did so by making variousstatements, in noticeswhich she causedto be sent to those indebtedto her clients,which were misleadingor deceptiveor likely to misleador deceive. The contraveningconduct occurred whilst the Act remainedin operation and it has applicationnotwithstanding the commencementof the new legislation: seeTrade Practices Amendment(Australian Consumer Law) Act No 2) 2010(Cth), Schedule 7,Item 6. Ms Sampsonhas admitted the contraveningconduct. The partieshave filed an agreedstatement of factsand joint submissionsin supportof orderswhich it is proposedshould be madeby consent. Having consideredthe parties' submissionsI have determinedto make the orders sought. My reasonsfor doingso follow. -2- THE AGREED FACTS The agreedstatement of facts providesa detailedaccount of the conductand the circumstancesin which it occurred.The following passagesare drawn from that statement: J. The Respondentat all materialtimes has: (a) Carriedon businessas a Partnerof and, from I July 2009, the principal of the law firm Goddard Elliott from offices in Glen Waverley,Victoria (Goddard Elliott); (b) beenone ofthe registeredowners of, andfrom I July 2009,been the soleregistered owner of, and carriedon businessunder, the business name'GoddardElliott'; (c) employedor engagedlawyers to work for GoddardElliott; and (d) acted for and on behalf of the mercantile agent Legal and CommercialRecoveries Pty Ltd and on behalf of video rental businesses,including but not limited to businessestrading under the namesVideo 2000,Video Ezy, Video Busters,Civic Video,Network Video, Box Office, Movies 4U, Homeshow Video, Family Videoland, Moveland, Leading Edge Video and Blockbuster in relation to debt collection work through out Australia (video rental clients). 4. At all materialtimes since at least April 2002 GoddardElliott sent video rental debt collection letters and notices(Notices), by post, to addresses locatedthroughout Australia on behalf of video rental clients and in the preceding12 month period beforethese proceedings, approximately 20,000 Noticeswere sent each month. The Notices 5. At all material times since at least Ãpril 2002 Goddard Elliott sent the followingNotices, on behalfof videorental clients, to addresses: (a) in all Statesand Territories during the periods Apr1I2002to January 2003a lettertitled 'URGENT NOTICE', ... andsending to addresses in all States and Territories during the periods January 2006 to December2008 and sendingto addressesin all Statesand Territories (except for Tasmania) during the periods December 2004 to December2005 and January 2009 to October 2010 a letter titled 'URGENTNOTICE' ... (together,Urgent Notice A); (b) in all Statesand Territoriesduring the period I December2004 to 12October2010 a letter titled 'URGENT NOTICE', ... (Urgent NoticeB); (c) in all Statesand Territories during the period I December2004 to l2 October 2010 a letter titled 'NOTICE OF IMPENDING PROCEEDINGS';... (Noticeof ImpendingProceedings); and (d) all Statesand Territories during the period I December2004 to -J- 2 June 2010 a documenr titled ,NOTICE oF CREDITORS INTENTION TO COMMENCE PROCEEDINGSAT A LOCAL COURT', ... and sendingto addressesin all Statesand Territories during the period January 2004 fo I December 2004 a document 'NOTICE titled OF CREDITORS INTENTION TO COMMENCE PROCEEDINGSAT A MAGISTRATESCOURT' ... andsending ro addressesin all Statesand Territories(excluding Tasmania) during the periodDecember 2004 to June2010 a documenttitled 'NOTICE OF CREDITORSINTENTION TO COMMENCE PROCEEDINGS AT A LOCAL COURT' (together,Notice of Intention to CommenceProceedings). 6. Furtherto paragraph4 above,at all materialtimes sinceat leastApril 2002, the practice of Goddard Elliott was to, when instructedby a video rental clientto recovera debtfrom a person,send Notices, including: (a) UrgentNotice A; (b) UrgentNotice B; (c) Noticeof ImpendingProceedings; and (d) Noticeof Intentionto CommenceProceedings, whereby an addresseemay have received only one of the Notices or a combinationof the Noticesunless in the meantimethe amountspecified was paid. Urgent NoticeA: Representations 7. UrgentNotice A containedstatements, inter alia, that: (a) GoddardElliott actedon behalf of an identified video rental client in 'together relation to the recovery of an outstanding amount with 830.00 (or such other amount specified that was not S0) Solicitors costs';and (b) the outstandingamount was required to be sent to Goddard Elliott within five (5) businessdays of the date of the letter failing which GoddardElliott had receivedinstructions to proceedwith legal action 'this without further notice and fhat will result in addedcosts to you'. 8. By sendingUrgent Notice A, containingthe statementsset out in paragraph7 above,the Respondentmade representations to the effect that: (a) the videorental client claiming the outstandingamount was necessarily entitledto recoversolicitor's costs of $30.00(or such other amount specified that was not S0) as part of the recovery of the outstanding amountclaimed (First Urgent Notice A Representation);and (b) if legal action was taken to recover the outstandingamount then this would necessarilyresult in the addresseeincurring additionalcosts associated with legal proceedings (Second Urgent Notice A Representation); -4 Urgent Notice B: Representations 9. Urgent Notice B containedstatements, inter alia, that: (a) the legal costsincurred by the addresseeas a result of GoddardElliott issuing proceedingsagainst them were likely to 'very substantially exceedthe amountof the claim to date'; and (b) if the matter was not resolvedto GoddardElliott's satisfactionwithin 'expensive five (5) businessdays of the date of the letter, legal proceedingswill be issuedagainst you withoutfurther notice'. 10. By sendingUrgent Notice B, containingthe statementsset out in paragraph9 above, the Respondentmade representationsto the effect that if legal proceedingswere issuedin respectof the outstandingamount then this would be likely to resultin the addresseenecessarily incuning additionallegal costs, and those said costswould substantiallyexceed the amountclaimed by the video rentalclient (UrgentNotice B Representation). Notice of Impending Proceedings:Representations 1L The Noticeof ImpendingProceedings contained statements, inter alia, that: 'using (a) documents were being prepared against the addressee all available court processesto recover the amountdue to our client qnd remainsoutstanding despite previous correspondenceand demands'to the video rentalstore client; and (b) if paymentwas not made by the addresseewithin five (5) business days from the date of the Notice of Impending Proceedings,Goddard Elliott would issueproceedings on behalf of the video rental client which 'will only involveyou in additional costs'. 12. By sendingthe Notice of ImpendingProceedings, containing the statementsset out in paragraphI I above,the Respondentmade representationsto the effect that if legal proceedingswere issuedin respectof the outstandingamount then this would result in the addresseenecessarily incurring additional legal costs (Noticeof ImpendingProceedings Representation). Noticeof Intention to CommenceProceedings: Representations 13. The Noticeof Intentionto CommenceProceedinss: (a) does not incorporatethe GoddardElliott letterheadand is similar ln format to a documentthat had been, or was able to be, filed with a Court; 'Unless (b) states, inter alia, that the full amount claimed is paid/you successfullydefend the summonsonce issuedat Court, then we will enterjudgment againstyou'; and (c) states,inter alia, thaf 'Suchjudgment will be enforcedby a warrant or a garnisheeorder and/or an attachmentofearnings order againstyour wageswhich will be servedupon your employer'. -f- 14. By sendingthe Noticeof Intentionto CommenceProceedings, in the form set out in paragraphl3(a) above, the Respondentmade representationsto the effect that the Notice of Intention to CommenceProceedings was a document that had been,or was able to be, filed with a Court (First Notice of Intentionto CommenceProceedings Representation). 15. By sendingthe Notice of Intentionto CommenceProceedings, containing the statementsset out in paragraph 13 above, the Respondentmade further representationsto the effect that: (a) judgment could be enteredby Goddard Ellioft against the addressee without the obtaining of an order from the Court, unlessthe amount was paid in full or the proceedingwas successfullydefended by the addressee(Second Notice of Intention to CommenceProceedings Representation);and (b) GoddardElliott could itself enforceany judgment obtainedagainst the addresseeby meansof a warrant,gamishee order and/orattachment of earnings (Third Notice of Intention to Commence Proceedings Representation). The misleadingconduct 16. The First UrgentNotice A Representationwas misleadingor deceptiveor was likely to misleador deceivebecause: (a) there was no outstandingamount which included$30 (or such other amountspecified) for solicitor'scosts; and (b) the video rental clients claiming the outstandingamounts referred to in UrgentNotice A, had no necessaryentitlement to recoversolicitor's costsin respectof the claim. 17. Each of the SecondUrgent Notice A Representation,the Urgent Notice B Representation,and the Notice of Impending ProceedingsRepresentation was misleadingor deceptiveor likely to misleador deceivebecause: (a) if unsuccessful,a creditorwould not have an entitlementto recover legalcosts, in respectof a debtclaim; (b) many of the debts claimed were small, and the Magistrates Court Act 1989 (Vic) and equivalent legislation in other Statesand Territories provide that legal costs cannot be recoveredfor small debt claims exceptin specialcircumstances; and (c) accordingly,even wherea creditoris successful,it is not necessarily the case that a debtor must pay legal costs in respectof a legal proceedingissued for the recoveryofa smalldebt. 18. The First Notice of Intention to CommenceProceedings Representation was misleading or deceptiveor was likely to mislead or deceive becausea reasonableperson in the class of addresseesthat were sent the Notice of Intentionto CommenceProceedings would believethat they had beensent a documentthat had been,or was able to be, filed in a Court, but in truth that -6- wasnot so. 19. The SecondNotice of Intentionto CommenceProceedings Representation was misleadingor deceptiveor likely to mislead or deceivebecause judgment cannotbe enteredby a videorental client against a debtorunless and until: (a) legalproceedings are commenced in the MagistratesCourt of Victoria, or equivalentcourts around Australia; and (b) thereafter: (i) the debtor does not file a defence,and an order in default of defenceis obtainedagainst the debtor;or (iÐ a summary order is obtainedby the video rental companyon the basisthat the debtorhas no defence;or (iii) on the hearing of the matter, the video rental company was successfulin its claimas asainstthe debtor. 20. The Third Notice of Intention to CommenceProceedings Representation was misleadingor deceptiveor likely to misleador deceivebecause, in orderfor a video rentalcompany to obtain a warrant,gamishee order and/orattachment of earningsagainst a debtor: (a) the companymust be successfulin its proceedingagainst the debtor; and then (b) orderror a wanant' Ë1'J,"#liä"åiä;t"l#"1ï:i:""r""ii,fÅ,"" and then (c) the Court must grant an order for a warrant, garnisheeorder and/or attachmentof earninssasainst the debtor". RELIEF The ACCC seeks declaratory orders, injunctions under s 80 of the Act, publication orders pursuant to s 86C(2)(d) of the Act, orders requiring compliance training under s 86C(2Xb) of the Act, costsand certain ancillary orders. Ms Sampsonconsents to the makingof suchorders. Savefor the proposeddeclaratory orders, the orderssought are of a kind which are commonlymade in proceedingsunder the consumerprotection provisions of the Act and are uncontroversial.They are,for the mostpart, directed to ensuringthatthere is no repetitionof -7- the contraveningconduct either by Ms Sampson,her firm andothers who, in future,might be mindedto engagein similarconduct. l0 Therehas, however, been some debate as to whetherdeclaratory relief is availablein suchcases and, if so,on what conditions. I)eclarations ll The Court has the power to make declarationsunder s 2l of the Federal Court of AustraliaAct 1976(Cth). Any declaratoryorder made in the exerciseof this powermust be directedto quelling legal controversybetween parties. The applicantmust have a real interestin obtaining the relief sought: seeAinsworth v Criminal Justice Commission(1992) 175 CLR 564 at 581-2. There must also be a proper contradictor: Forster v Jododex AustraliaPty Ltd (1972) 127 CLR42L at 437-8. t2 Each of these requirementsis satisfiedin the presentproceeding. A disputehas existedbetween the partiesas to whetheror not Ms Sampsonhad engagedin contraventions of s 52 of the Act. The ACCC is a public body which had power underthe Act to bring enforcementproceedings. Declaratory orders of the kind proposedserve the public interest by makingit plain that conductsuch as that admittedby Ms Sampsoncontravenes the Act: seeAustralian Competition and ConsumerCommission v Midland Brick ComparryPty Ltd (2004) 207 ALP*329 at 333; Rural PressLimited v Australian Competitionand Consumer Commission(2003) 216 CLR 53 at9l. l3 In Forster Gibbs J (with whom McTiernan,Stephen and MasonJJ agreed)adopted Lord Dunedin'sdescription of a propercontradictor (in RussianCommercial and Industrial Bank v British Bankfor Foreign TradeLìmited ll92ll2 AC 438 ar.448)as "one presently existingwho hasa true interestto opposethe declarationsought": seeat 438. In Australian Competitionand ConsumerCommission v MSY TechnologyPty Ltd No 2) 1201ll FCA 382 PerramJ addeda requirementthat the propercontradictor must not only be a pafi but must argueagainst the granting of relief: seeat [32]. In adding this requirementhis Honour consideredhimself bound by thejoint judgmentof Keely and BeaumontJJ in BMI Limited v FederatedClerks Union of Australia(1983) 5l ALR 401. -8- t4 More recently,Dodds-Streeton J has held that the true ratio of BMI is muchnaffower and that, in any event, the decisionis distinguishable: seeAustralian Competitionand ConsumerCommission v WilleseeHealthcare Pty Ltd (1,{o2) [2011]FCA752 atl32l-þ31. l5 I respectfullyagree with her Honour'sanalysis. In BMI the failureof the respondents activelyto opposethe making of declarationswas but one of a numberof factorswhich led the Court,in the exerciseof its discretion,to refuserelief. Forster, in my view, establishes that a personwill be a "propercontradictor" provided that he or shehas a genuineinterest in resistingthe grant of relief. Ms Sampsonis a proper contradictornotwithstanding her agreementto the making of the proposeddeclarations. Despite her willingness to compromiseher position in the litigation she retaineda genuineinterest in resistingthe grantingof the declarations. 16 One of the reasonsfor requiringthat therebe a propercontradictor is to ensurethat the Court is suppliedwith a factualfoundation for the making of orders. Somejudges have expressedreservations about whetherthis requirementcan be satisfiedin circumstances where the partieshave reachedagreement as to the facts and the orderswhich shouldbe made.These reservations can be tracedto the statementof Keely andBeaumont JJ in BMI at 412-3,that declarations"ought not to be made merely on admissionsof counselor by consent,but only if the court is satisfiedby evidence." This statementof principle led Finkelstein J to hold, in Australian Competition and Consumer Commissionv Allerg1,, Pathway Pty Ltd 120091FCA 960 at ll9l, that the Court should "not grant a declaration involvinga publicright in the absenceof evidencethat supportsthe declaration."Statements of agreedfacts did not constitute"evidence" for relevantpurposes. Seealso: Australian Competition and Consumer Commissionv Cosic Holdings Pty Ltd [2009] FCA 1579; Australian Competitionand ConsumerCommission v Wilson Parking 1992 Pty Ltd 120091 FCA 1580(per Barker J). 17 Other judges have, however, been preparedto grant declaratoryrelief on the evidentiaryfoundation provided by a statementof agreedfacts which has been made in accordancewith the requirementsof s 191 of the EvidenceAct 1995 (Cth): seeAustralian Competitionand ConsumerCommission v SkinsCompression Garments Pty Ltd [2009] FCA 710 (per BesankoJ); Ministerþr Environment,Heritage and the Arts v PGP Developments Pty Ltd (2010) 183 FCR l0 (per Stone J); MSY Technologyat l27l (per Perram J). -9- 'agreed An fact' is onewhich the partiesto a proceedinghave agreed will not be disputedin that proceeding: see s 191(t). Whilst agreementas to a fact will not necessarilybe determinativeof the truth of that fact, evidenceneed not be broughtto prove its existence: sees l9l(2)(a). l8 In my view the agreedstatement of facts,when considered in light of s l9l, provides a sufficient basis for the making of the declarationssought in the presentproceeding. The agreedstatement clearly identifiesthe impugnedstatements and the reasonsthat those statementsare misleadingand deceptive. The declarationswhich are soughtaccurately describethe contraveninsconduct. Injunctions t9 Injunctiverelief is providedfor unders 80 of the Act. 20 The partiesare agreedas to the termsof the injunctions. They enjoin Ms Sampson from any repetitionof the impugnedconduct and therebyfuither the consumerprotection objectivesof the Act: cf ICI Australia OperatíonsPty Ltd v Trade Practices Commission (1992)38 FCR248 at268. PublicationOrders 2l Section86C(2Xd) of the Act empowersthe Courtto makethe publicationorders on which the partiesare agreed. 22 The purposesserved by such orders were identifred in Medical BenefitsFund of AustraliaLtd v Cassidy(2003) 135FCR I af 20-21(per StoneJ) as includingthe dispelling of incorrector falseimpressions created by the misleadingand deceptive conduct, the alerting of consumersto the fact that suchconduct has occurred and in aiding the enforcementof the primaryorders and the preventionof any repetitionof the contraveningconduct. ZJ Thesepurposes will be servedby the publicationof the advertisementsin publications wherethey are likely to come to the attentionof legal practitionersand thoseinterested in legalmatters. -10- ComplianceTraining 24 The Courtis empoweredto makeorders of the kind proposedpursuant to s 86C(2)(b) of theAct. 25 GoddardElliott presentlyhas no trainingprogramme which is designedto alert the principal and her staff to their obligationsunder the Act and its successor.The training requiredby the ordersis linked to the impugnedconduct: cf Australian Competitionand ConsumerCommission v Auspine Limited (2006) 235 ALR 95 at 106-7 and the authorities therecollected. The trainingis to focuson Chapters2 and3 of theAustralian Consumer Law (Schedule2 to the Competitionand ConsumerAct 2010 (Cth)). Chapter2 dealswith general protectionfor consumersincluding the proscriptionformerly containedin s 52 of the Act. Chapter3 covers,among other things, unfair practiceswhich includethe makingof falseor misleadingrepresentations about goods or services.Those orders should be made. Costs 26 The partiesare agreed that a costsorder should be madeagainst Ms Sampsonand as to the quantumofsuch an order. I certifu that the precedingtwenty- six (26) numberedparagraphs are a true copy of the Reasons for Judgmentherein of the Honourable JusticeTracey. Associate: Dated: 17October 2011